Results
Q4 and Year 2009/10
Media & Analyst Conference
Zurich, 3 June 2010

Agenda1. Highlights and Business Review

Paul Van Iseghem

2. Business Development

Paul Van Iseghem

3. Financial Review

Julius Renk

4. Strategy and Outlook

Paul Van Iseghem

5. Succession of the CEO

Felix Bagdasarjanz

6. Proposals Shareholders’ Meeting

Felix Bagdasarjanz

22 June 2010

LEM Business Card
■ LEM is the global market leader in providing innovative and high quality
solutions for measuring electrical parameters■ Its current and voltage transducers are used in a broad range ofapplications in industry, traction, energy & automation and automotivemarkets■ LEM is a high growth global company with approximately 1’000 employees.
It has production plants in Geneva (Switzerland), Copenhagen (Denmark),
Machida (Japan), Beijing (China) and regional sales offices close to its
clients locations■ LEM is listed on the SIX Swiss Exchange since 1986
Market Cap of CHF 390 million
32 June 2010

LEM Production and Logistics World-WideProduction Centers (PDCs)
Adaptation Centers
Sales Offices
Agents / Distributors
42 June 2010Markets ServedTraditional Markets

New Markets

Industry■All areas of reliable current
measurement■ Motor drives, power conversion
AC/DC, power supplies, UPS,
welding, medical scanner, newenergies, leakage current■ Test & measurement

Traction & Trackside■On-board applications,inverters■ Trackside and energy
monitoring

Automotive■Battery Management(all car types)■ Electric Motor Control(HEV-EV)

Energy & Automation■Process control■ Battery Monitoring,Energy Metering

52 June 2010

1. Highlights and Business Review
Paul Van Iseghem, President & CEO

2 June 2010

1. Financial Highlights Moving Strongly out of the Recession

Q3 to Q4 2009/10Year to Year

Sales

20.9%

-5.7%

Operational EBIT

32.4%

-11.6%

After accounting for the stock option plans
EBIT

7.6%

-48.2%Net earnings

28.2%-56.0%

72 June 2010

1. Business Highlights

■
■
■
■

Opening of a new 10’000 m2 facility in Beijing, China
Acquisition of Danfysik ACP in Copenhagen, Denmark
Growth of renewable energy business over pre-crisis levels
Automotive production transferred to China, reaching break-evenfor 2 consecutive quarters

82 June 2010

1. Business Review – Zoom-in on the Recession
CHF millions

Op. RoS
30%

8070
60

20%5040■ Q4 book to bill ratio 1.343010%■ Q4 sales over Q1 and Q2of 2008/09

201000%Q1
Q2Q3Q4Q1Q2
Q3
Q42008/09 2008/09 2008/09 2008/09 2009/10 2009/10 2009/10 2009/10
Orders received
2 June 2010

Sales

91. Business Review - Sales
CHF millions

200

■

150

■

100■50■■Last 2 years effected by the recession…. going in and going out
Sales for the year of CHF 185.5 million,a decrease of 5.7%
A slow start to the year but pick up inthe last 2 quarters
Q3 to Q4 sales increased by over 20%Sales in the Automotive segment were
7.9% of the total, prior year was 7.6%

02005/06 2006/07 2007/08 2008/09 2009/10

Automotive Segment

Industrial Segment

102 June 2010

1. Business Review – Industrial Segment
SalesgrowthYear toYear

Q3 to Q4

Sales
M CHF

Europe

-13%

26%

94

N. America

-17%

17%

20

Asia

17%

16%

54

ROW

-19%

20%

3Total

-6%

21%

1712%

31%

55%

Europe12%

North America
Asia
Rest of the World No recession in Asia

112 June 2010

1. Business Review – Industrial Segment
CHF millions

Op. EBIT in % of sales

20025160

20120

1580104050005/06

06/07

07/08

08/09

Markets and Applications
Industry: Decrease of sales by 5.9%
for the year and Q3 to Q4 growth of 28%
Strong recovery of motor drives market
and renewable energy markets, now
18% of total sales (FY 2007/08 was 10%)
Traction: Sales decreased by 4.9%.
This market has suffered the least in therecession but is late in the cycle
Energy & Automation: decreased insales by 17%, the battery monitoringmarket is performing well and havetripled

09/10
122 June 2010

1. Business Review – Automotive SegmentSales
M CHFSalesgrowthYear toQ3 to Q4YearEurope54%60%

1N. America

-6%1%

8Asia

-3%38%

6Total-1%21%1510%

41%49%
EuropeNorth America
Asia and Rest of World Our focus on Asia shows results

132 June 2010

1. Business Review – Automotive Segment
CHF millions

Op. EBIT in % of sales

252520

20

15

15

1010

55Market
Start of production for several newcustomers in USA, Japan and Europe
Two consecutive quarters of break-evenfor Op. EBIT
Q3 to Q4 growth of 21%Applications
0005/06

06/07

07/08

08/09

09/10-5-5-10-10-15-15

2 June 2010

Multiple customers in Asia and USA
starting production of new platforms forgreen cars and battery management
Start of new production lines in China
with significant cost reduction

14

2. Business Development
Paul Van Iseghem, President & CEO2. Business Development – Results for the Industry Market
New Business> CHF 0.5 million

RegionSoP
2009/10

SoP
2010/11

Photovoltaic

Japan

Q4

Photovoltaic, Wind

China

Q1

Drives, Airconditioning

N. America

Q2

Photovoltaic, Wind

Spain

Q4

Wind

Scandinavia

Drives, Airconditioning

Scandinavia

Q3

Photovoltaic
Photovoltaic, Drives

Scandinavia
GermanyQ3Q3

Q3, Q4

SoP = Start of Production
162 June 2010

2. Business Development – Results for the Automotive Market
New Business> CHF 0.5 million

Application

InvolumeSoP
2010/11

China

BM, EV, HEVx

JapanBMx

JapanBMx

JapanEPSx

Korea

EV, HEVx

EuropeBMx

EuropeEV, HEVx

USA

EV, HEV, BMx

Q4USABMx

Q2

Q2

Q1

EV = electric vehicle, HEV = hybrid electric vehicle, BM = battery management, EPS = Electric Power Steering
SoP = Start of Production
172 June 2010

2. Business Development ChinaProduction■ Opening of a 10’000 m2 facilitySales■ Market share of 50+%
CHF millions

CHF millions

707060605050

CAGR: 24%40403030202010100005/06

2 June 2010

06/07

07/08

08/09

09/10

05/06

06/07

07/08

08/09

09/10

182. Business Development - Innovation
Acquisition of LEM Danfysik creates a broader range of high accuracy products
for the medical, test and measurement and precision motor controls market
We also launched:■

ITL 900 the most precise industrial transducer in themarket today■

RT coil – setting a new benchmark for accurate energy
consumption measurement■

The CAS, CASR and CKSR family of current transducers
using a new closed loop Fluxgate technology
192 June 2010

3. Financial review
Julius Renk, CFO

3. Income Statement
In CHF thousands

2008/09

2009/10%

Sales

196’813185’512- 5.7%

Gross margin %

43.7

43.4

-0.3 ppt

Operating costs(56’806)(54’629)

3.8%

Operational EBIT

29’21925’807-11.7%

Additional SOP income/costs

4’622(8’285)-279.3%

EBIT

33’841

17’522-48.2%Net financial expenses(990)(1’355)-36.9%

Income taxes(8’926)(5’635)36.9%

Net profit23’925

10’532-56.0%
212 June 2010

3. Gross Margin Development
In CHF millions
CHF millions% of sales

2008/092009/10

Gr. margin

86.080.4

Gr. margin% Sales

43.7%

43.4%

9060%
7545%
60

4530%

3015%
15

 Lower sales over the last two years

led to a negative leveraging effect0%0
2005/06 2006/07 2007/08 2008/09 2009/10

222 June 2010

3. Operating Expenses
CHF millions% of sales
50%

70

In CHF millions

2008/09

2009/10

OpEx

56.8

54.6

OpEx
% Sales

28.9%

29.4%

45%
6040%
5035%

30%
4025%3020%15%

2010%

 The cost reductions introduced in November

2008 continue to show effect

105%

00%
2005/06

2006/07

2007/08

2008/09

2009/1023
2 June 2010

3. R&D Expenses

CHF millions% of sales

1512%

In CHF millions

2008/09

2009/10

R&D

10.8

11.5

R&D% Sales

5.5%

6.2%

129%

96%

■ Continuing R&D at 5.7% of sales

6■ LEM Danfysik corresponding to 0.5% of sales:
3%



30

LEM Danfysik IPR amortization
R&D activities in Copenhagen0%
2005/06

2 June 2010

2006/07

2007/08

2008/09

2009/1024

3. Operational EBIT

CHFmillions

Avg. Q
2007/08

Q1
2008/09

Q2
2008/09

Q3
2008/09

Q4
2008/09

Q1
2009/10Q2
2009/10Q3
2009/10Q4
2009/10

Sales

50.8

55.5

55.5

45.1

40.7

35.6

43.2

48.2

58.4

Op.
EBIT

8.7

12.0

9.4

4.1

3.7

3.2

5.4

7.4

9.8

Op.
RoS

17.2%

21.6%

16.9%

9.0%

9.3%

8.9%

12.6%

15.3%

16.8%

 Q4 2009/10 on pre-crisis level
252 June 2010

3. Operational EBITCHF millions

In CHF millions

2008/09

2009/10Op EBIT

29.2

25.8

Op EBIT% Sales

14.8%

13.9%

% of sales30%
3020%

2010%

10 Operational EBIT is result of gross margin andOpEx, excluding additional SOP cost/income00%
2005/06 2006/07 2007/08 2008/09 2009/1026

3. SOP volatility significantly reduced going forward■

LEM stock option plans (SOP) are cash settled; their cost is driven byshare price development (270; 150; 340 at respective year end)■

“SOP 4 Special Offer” in 02-03/2010–■

Allowed to close SOP4 per 31.03.2010 instead of 31.03.2015

Significant reduction of volatility in time and value# outstanding
options

31.03.2008

31.03.2009

31.03.2010

31.03.2011

31.03.2012

70’45766’20740’79423’444max.

0max.

Closure ofSOP 5

SOP 6
27

2 June 2010

3. EBITIn CHF millions
CHF millions

2008/09

2009/10

EBIT

33.8

17.5

EBIT% Sales

17.2%

9.4%

% of sales

4030%

3020%
2010%
10

 2009/10 with reverse SOP impact

00%
2005/06 2006/07 2007/08 2008/09 2009/10

2 June 201028

3. Taxes
2008/09

2009/10

Expected income tax rate

25.0%

25.7%

Expected withholding tax rate

4.7%

6.2%

Expected tax rate

29.7%

31.9%

Withholding tax for results from prior years

3.0%

One-time effects-2.5%

Effective tax rate

27.2%

34.9%

LEM decided to repatriate all available dividends from subsidiaries
 Withholding tax considered part of expected tax rate
 2009/10 includes a CHF 0.5 million withholding tax liability covering results of prior years,corresponding to 3.0% tax rate impact
 Tax rate expected to be significantly decreased going forward

292 June 2010

3. Net profit
2008/09

2009/10

Net profit

23.9

10.5

Net profit% Sales

12.1%

5.7%

EPS diluted

20.83

9.17

In CHF millions
CHF millions% of sales
25%

25

2020%

1515%

1010%
+4.6

-8.9

5%

5

2008/09-1.0

29.2
23.90%

0
2005/06 2006/07 2007/08 2008/09 2009/10

2009/10-8.3

Net profit decreased by 56% strongly
impacted by the provisions for the SOP

25.8

-5.6
10.5

Op. EBIT SOP inc./costs
2 June 2010

-1.4

FinancialexpenseIncometax

Net profit30

3. Consolidated Balance Sheet
In CHF thousands

31.03.2009

31.03.2010

Cash and cash equivalents

27’95129’756

Accounts receivable

31’92043’454Inventories

23’72821’744

Other current assets

2’834

1’989

Total non-current assets

29’77835’719Total assets

116’211132’662

Accounts payable

12’61423’416

Other current liabilities

14’997

19’775

Total non-current liabilities

5’108

6’092

Equity83’492

83’379Total liability and equity

116’211132’662

15.1%

14.8%

 Inventory turns

4.7

4.8

 Equity ratio

72%

63%

 Net financial assets (CHF millions)

27.9

29.8

Avg. net working capital % sales

31
2 June 2010

3. Cash Flow Statement
In CHF thousands

2008/09

2009/10

Net profit
Non-cash items

23’925
3’361

10’532
7’676

Cash flow before changes in NWC
Cash flow from changes in net working capital

27’286
3’651

18’2088’091

Cash flow from operating activities
Cash flow from investing activities

30’937(9’052)

26’299(13’275)

Free cash flow

21’85513’024

Cash flow from financing activities(20’445)(10’572)

Change in cash and cash equivalents
Cash and cash equivalents at the end of the period

1’440
27’951

2’452
29’75632

2 June 2010

3. Summary Financial Results■■■■

Operational profitability back to pre-crisis level
Net profit heavily impacted by reverse SOP costs
Significantly reduced SOP volatility in time (3 years) and value (10%)
Strong cash flow and balance sheet

33
2 June 2010

4. Strategy and Outlook
Paul Van Iseghem, President & CEO

4. Market Factors and Strategy

The strategy is confirmed
■
■
■
■
■
■

The domain of power electronics is robust and fast growing
With exception of the crisis, high CAGR of 12 to 14%
Our multi market approach evens out the extremes
Pure play components with LEM Inside strategy
Focus on operational excellence, Quality-Cost-DeliveryFocus primarily on organic growth35
2 June 2010

4. Market Factors and Strategy■ We are more than ever convinced that ourbusiness strategy and 4 strategic drivers
for growth will give us an advantage in thepresent economy■ The diversification of the markets will
ensure to even out extremes of thedifferent business cycles■ We are setting up new leading indicatorsthat will help us increase our reactivity tothe market

36
2 June 2010

4. Outlook■ We are currently enjoying a very high bookings level, which is mainly

coming from the traditional and robust drives market and from therenewable energy market, both wind and solar■ We are also expecting a fast ramp-up of production for various projects
in the Automotive segment■ We have started the year on a high note, above Q4 in bookings andbillings■ The rest of the year remains unclear and is not yet predictable■ The global financial uncertainties have not been removed, they influence

the level of industrial investment■ Exchange rates are very unstable and may impact our business

37
2 June 2010

5. Succession of the CEO
Felix Bagdasarjanz, Chairman of the Board2 June 2010385. Changes in the Management

■■

■
■

After 10 years with LEM Paul Van Iseghem will retire by the end of theyear
Since the divestment of LEM Instruments in 2005, Paul Van Iseghemhas been leading the company successfully during an impressive
phase of profitable growth and shareholder value creation
To note are the expansion in new markets, in particular in China, and in
new applications like in renewable energies
The Board of Directors gratefully recognizes his outstandingachievements and the excellent performance of LEM throughout theyears of his mandate392 June 2010

5. Changes in the Management■■■■

François Gabella will assume the role of CEO of LEM starting
July 1, 2010
Born in 1958 he is Swiss national graduated from EPFL with anengineering degree in microtechnics and holds an executive MBA fromIMD, International Institute for Management Development
François Gabella has a broad industrial background, worked inSwitzerland, the United States, Germany and France for companies
such as Schlumberger, ABB and AREVA, where he has held global
responsibilities. In his last function, François Gabella was CEO ofTESA SA in Switzerland, a world leader in measuring instruments
The Board is confident that his broad experience gained in various
management functions as well as his personality are a guarantee forthe continuation of the strong executive leadership and the future
prosperity of the company
40

2 June 2010

6. Proposals for the Shareholder’s Meeting
Felix Bagdasarjanz, Chairman of the Board

6. Proposals for the Shareholder’s Meeting■■■

The Board of Directors will propose the payment of an ordinary
dividend of CHF 5.00 per share
In view of the positive outlook for further profitable growth of thecompany and of the significant potential to increase the financial
leverage in the balance sheet of LEM, the Board of Directors willpropose in a first step the payment of an additional extraordinary
dividend of CHF 15.00 per share
As a second step, the Board of Directors intends to launch a sharebuy-back program on a second line of trading to start in summer
this year. This program shall be in the amount of up to CHF 15
million and extend over a period of maximum two years
422 June 2010

6. Proposals for the Shareholder’s Meeting■■

Following the recommendation of LEM’s second largest
shareholder, 7-Industries Holding BV, the Board of Directors
proposes the election of Dr. Ilan Cohen as a new Director
Israeli and Belgian national, Ilan Cohen is President and CEO ofthe Israel based companies Servotronix Motion Control Ltd andServotronix Motion Systems Ltd43
2 June 2010

6. Proposals for the Shareholder’s Meeting

Amendment to the Articles of Incorporation of LEM Holding SA■

Mr. Werner O. Weber who presently owns 27.4 % of LEM’s sharecapital (including through WEMACO Invest AG) has requested toinclude in the articles of incorporation of the company an opting-out
clause according to article 32 of the Federal Act on Stock Exchanges
and Securities Trading (SESTA). This would release any shareholder(including Mr. Weber) from the obligation to submit a public takeoveroffer to all shareholders as soon as his participation in LEM exceeds
33 1/3 % of the voting rights■ The Board of Directors has discussed the request of Mr. Weber andcame to the conclusion that it is not in the best interest of all shareholders.
Therefore the majority of the Board of Directors recommends to voteagainst the proposal442 June 2010

6. Financial Calendar
Financial calendar
25 June2010
5 August2010
9 November
2010
15 February
2011
9 June2011
1 July2011

Ordinary Shareholders’ MeetingQ1 2010/11 results
Q2 2010/11 results
Q3 2010/11 results
Full year 2010/11 results
Ordinary Shareholders’ Meeting

For further information
Suzanne Hochheimer
Corp Communications
Tel: +41 22 706 12 57
E-mail: suh@lem.com

Julius Renk
CFO
Tel: +41 22 706 12 50
Email: jrk@lem.com
45

2 June 2010